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Study Says Shelf-Space Crunch May Hurt CG Film Studios Most

9 Aug, 2005 By: Holly J. Wagner

The DVD shelf-space crunch at retail will take a greater toll on CGI studios like Pixar and DreamWorks Animation than on studios with a broader range of offerings, an analyst report said.

Analysts at JP Morgan said the shelf-space squeeze is the culprit for many studios' recent financial shortfalls.

“Though it is true that many retailers are devoting more shelf space to DVD (largely at the expense of CD), industry sources suggest that this increase has not kept pace with the rise in the number of SKUs,” wrote analyst Spencer Wang. That led him to two conclusions the industry is grappling with: it's harder to get product on shelves, and it's harder to keep it there.

“In our opinion, the major diversified film studios are fairly insulated from the negative effects of this trend,” Wang wrote. “On the other hand, CG film studios, limited by reliance on very few key titles, should be challenged by this emerging issue … Cannibalization of units by other competing DVD titles cannot be offset by releasing more titles since CG film studios currently only produce one or two films per year.”

Although the overall DVD industry looks healthy and has seen 6.3 percent growth in the first six months of this year, Wang cautioned that studios cramming the retail pipeline with releases could eventually backfire on the majors.

He suggests that “diversified studios may be better off releasing DVD titles over a longer period of time because this may lead to higher units sold per title and a longer ‘tail' for the DVD cycle.”

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